Sounds Good

Written by GSCR Staff   
Friday, 15 March 2013 09:53

Good morning!  We are excited about the weekend as March Madness has officially started with conference tournaments.  The madness continues on Wall Street with this running of the bulls.

Harmonic Inc. (NASAQ – HLIT - $5.83) is a unique play on the communications industry where the company designs and manufactures video infrastructure products and system solutions to broadcast and on-demand video services for televisions, personal computers, tablets, and mobile devices both domestically and internationally.  The company offers a variety of content delivery systems for a multitude of media, broadcast encoders, video-optimized storage, and several other hardware and software solutions.  It provides full technical and professional services for all products.

Harmonics announced earnings for 4Q12 and FY12.  The company missed on 4Q12 revenue but beat EPS by a penny.  More importantly the company turned the corner after at least three straight quarters with negative or close to zero profit.  Additionally, the company divested the Cable Access product line to Aurora Networks, Inc. for $46 million, a deal which will be complete by the end of 1Q13.  This business represented the slowest growth combined with the lowest margin for the company.  The company continues to streamline and focus higher growth potential.

Harmonic continues to grow its Video Production and Playout, Video Processing, and Cable Edge products.  Recently, Norwegian operator GET implemented a total solution package from HLIT for its IPTV, cable, and OTT multi-screen services incorporating Harmonic’s video infrastructure solutions.  In January the company completed a deal with Eutelsat communications in the sale of its ProStream 1000 ACE stream processing and transcoding solutions to optimize bandwidth allocation for its direct-to-home (DTH) service in Africa.

The stock has been trading on heavy volume averaging over half a million shares per trading session over the last three months.  The EMA and Fibonacci analysis indicate a very bullish trend in the short term as HLIT continues to climb from its $4.00 low in mid November back to the early 2012 highs near $7.00.  We think all the factors mentioned above drive the stock to that $7.00 level.

Have a great weekend! 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours. 

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